Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. the afn equation and the financial statement-forec

The AFN equation and the financial statement-forecasting approach both assume that assets grow at relatively...

80.2K

Verified Solution

Question

Finance

image
The AFN equation and the financial statement-forecasting approach both assume that assets grow at relatively the same rate as sales. However, the relationship between assets and sales is often a little more difficult than that. In particular, some firms use regression analysis to predict the required assets needed to support a given level of sales. Mile Brewing Co. has used its historical sales and asset data to estimate the following regression equations: Accounts Receivable Inventories -$99,220 +0.225(Sales) $9,340 + 0.223(Sales) Mile Brewing Co. currently has sales of $984,000, but it expects sales to grow by 20% over the next year. Use the regression models to calculate Mile Brewing Co.'s forecasted values for accounts receivable and inventories needed to support next year's sales. Forecasted Values for Next Year Accounts receivable Inventories Based on the next year's accounts receivable and inventory levels predicted by Mile Brewing Co.'s regression equations, the firm's DSO for next year is expected to be . Use 365 days as the length of a year in all calculations

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students